hi I have a 10 column worksheet to do for my homework and I'm stuck on the loan interest rate

the bank loan interest rate (% per year) = 8
Bank Loan (due 2011) = 25,333
The business was purchased on 1 June 2008

so how can I calculate the accrued interest expense and accrued interest revenue? Also can I ask how come in this case it needs both the accruals (expense and revenue)?

THANKS LOT

well I worked it out that:
loan divides 3 because there is three years (2008- 2011) and then time 8 divide 100 to get the interest part and then divide it by 12 to get monthly as it only records in the month of June
the answer is $56 interest monthly

so do I put it in:
DR interest expense = 56
CR Accrued interest expense = 56

and that's it... but it says something about the accrued interest revenue??

Try loan amortization table calculator.. just Google it..

Quote:

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Originally Posted by aas

try loan amortization table calculator.. just google it..

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Using calculators online is nothing but plug and chug and doesn't help anyone learn how to do their work. Tools are useful after you learn what it is that you're doing.

First of all, SO, SO terribly sorry about the neg reputation I just left you. I didn't realize you were answering yourself. It's incorrect, but it's not appropriate to leave you a negative for an incorrect answer to your own question. I just thought that was another poster give you an incorrect answer.

If you post something else, I'll leave a positive to balance it back out, okey dokey? (Or maybe someone can leave one on that post for the same purpose. I just can't do two.)

Anyway... interest is principle x rate x time. You cannot divide the principle down by 3 because they aren't paying interest on only 1/3 of the loan each year. That whole loan exists until they make a payment on it, and therefore interest is on the entire amount of the loan. Use the formula I just gave you.

I don't know what time is supposed to be. Are you doing adjusting entries for June? Because it only says that's when the company started, but the adjusting entries can be done for just June, or not until the end of the year. That has to be taken into consideration.

You will never have expense and revenue combined together like that. Assuming this isn't the bank you're doing the books for, then this is an expense to this company. If you borrow money, you have no revenue. It does not need both accruals and I'm not sure where you're getting that information from. Unless you are also doing it from the bank's side, but since you're doing a worksheet, it's difficult to believe a problem would have you doing a worksheet for a bank.